South Korea Moves Urgently to Control Petrochemical Feedstock Hoarding as Supply Chain Risk Escalates to the National Security Level

On April 14, the South Korean government announced that from April 15 to June 30, it would impose anti-hoarding measures on seven key petrochemical feedstocks, including ethylene, propylene, butadiene, benzene, toluene, and xylene. Relevant companies will not be allowed to hold inventories exceeding 180% of the level recorded during the same period last year. The rollout of this emergency control measure marks the point at which the impact of Middle East geopolitical conflict on the global chemical supply chain has escalated from price volatility to the level of supply chain stability.

Market background: shipping costs surge, feedstock supply comes under pressure

Since tensions in the Red Sea continued to intensify, global marine insurance rates have risen by 35% to 40%, while insurance costs on some high-risk routes have even doubled. The insurance cost for transporting chemicals from Dubai to Rotterdam has climbed from US$200 per ton in 2023 to US$330 per ton at present. Shipping companies have been forced to reroute around the Cape of Good Hope, extending transit times by an average of 12 to 15 days and raising logistics costs by 15% to 20%.

The situation in the Gulf has become even more severe. According to data from Lloyd’s of London, more than 15% of Gulf shipping routes have been directly refused insurance coverage, forcing chemical companies either to choose more expensive alternative routes or to bear significantly higher transportation risks.

South Korea moves: from “cracking down on speculation” to “defending liquidity”

As a major manufacturing economy highly dependent on imported raw materials, South Korea’s petrochemical feedstocks are not only tied to the operations of chemical producers themselves, but also affect downstream chains such as plastics, fibers, rubber, electronic materials, and automotive components, ultimately influencing exports and overall manufacturing stability.

The latest control measures set out a clear time period, product scope, and inventory ceiling, showing that the policy goal is not merely symbolic. It is aimed at stabilizing the second quarter, the most sensitive period. Mid-April through the end of June is exactly when global markets are digesting the Middle East shock, Asian buyers are rearranging procurement plans, and petrochemical companies are resetting prices.

Industry analysis holds that the South Korean government is effectively trying to interrupt a vicious cycle in which “companies stockpile for self-protection → market supply tightens further → prices rise even more.” When every company, fearing future price increases or supply disruptions, actively builds inventory, that collective behavior ends up intensifying market tension and pushing supply-demand imbalances even further.

China’s chemical industry faces a test at its “lifeline”

For China’s chemical sector, the Strait of Hormuz can fairly be described as a “lifeline.” Data show that 55% of China’s imported chemical feedstocks rely on the Middle East, and 92% of those imports pass through the Strait of Hormuz. Around 40% of methanol depends on imports, with 85% moving through this route. For ethylene and propylene, 35% depend on imports, and 78% pass through this corridor.

If supply through the Strait of Hormuz is interrupted, Chinese chemical companies will face not only higher costs, but also the possibility of a genuine feedstock cutoff crisis. In February this year, a polyethylene producer in Zhejiang was forced to suspend production for three weeks due to a methanol supply interruption, causing direct losses of more than 20 million yuan.

To deal with this risk, Chinese chemical companies are accelerating supply chain restructuring. Sinopec’s 1 million-ton methanol storage base in Abu Dhabi has recently been put into operation. Wanhua Chemical has reduced the share of its Middle Eastern methanol procurement from 40% to 25%, while raising supply from Southeast Asia, including Malaysia and Indonesia, to 35%. COSCO Shipping has opened a new “Middle East–Southeast Asia–China” route that bypasses the Strait of Hormuz, with transport costs only 12% higher than routing around the Cape of Good Hope.

Supply chain restructuring: from “cost first” to “security first”

The Middle East conflict is accelerating a structural transformation of the global chemical supply chain. Over the past twenty years, companies pursued supply chain layouts optimized for the lowest global cost. Now, the priority is shifting toward resilience and security.

Europe is pushing the construction of a “European chemical circle,” while Asia is strengthening an “Asian chemical circle,” both aimed at reducing dependence on Middle Eastern transport. China is also accelerating the establishment of raw material storage hubs in Southeast Asia, while launching coal-to-methanol projects in Inner Mongolia and Xinjiang. Once these projects come online in 2027, China’s dependence on Middle Eastern methanol is expected to fall by 15%.

Policy effects and industry impact

In the short term, South Korea’s anti-hoarding measures are expected to produce two effects. First, they should cool the spot market and prevent raw materials from moving even further away from fundamentals due to stockpiling behavior. Second, they should provide a degree of predictability for downstream manufacturers, at least ensuring over the next two months that the government will not allow key feedstocks to be arbitrarily locked up.

However, the measures do not solve the underlying problem. Structural challenges such as geopolitical risks stemming from the Middle East conflict and higher import costs remain in place. The policy can only prevent the domestic market from amplifying tension through panic-driven behavior.

Industry warning: supply chain risk has been upgraded

South Korea’s move sends a strong warning signal across the entire Asian chemical chain: the risks facing the chemical industry today have gone beyond simple price increases and have escalated to the question of whether supply chains themselves could spiral into disorder because of panic and self-protective behavior.

Once supply chain problems are elevated from the corporate operating level to the national security level, the market can no longer be expected to function according to normal commercial rhythms. It will instead be shaped far more heavily by policy decisions. That presents a new challenge for global chemical companies: how to build supply chain systems with stronger resilience in an uncertain world.

Industry experts point out that when the turbulence of the Strait of Hormuz meets South Korea’s emergency controls, the chemical industry is being pushed through a profound transformation. Future competition will no longer be just about cost. It will be about supply chain security and resilience.